Metlife India sells 30% stake to PNB

Very soon Metlife India would be known as PNB Metlife India. India’s 2nd largest nationalized bank, Punjab National Bank (PNB), has decided to take a lion’s share of 30% stake and occupy a dominant position in Metlife’s Bancasurance space (Currently Metlife has tie-ups with Karnataka Bank and Barclays). Rajesh Relan, MD, Metlife India, opined that the addition of PNB will help Metlife convert into a significant player in the insurance industry and in return the insurer can provide insurance expertise and bancassurance capabilities that will be an asset to PNB.

The edge that Metlife enjoyed over a dozen suitors was that it has a diversified Indian shareholding which helped PNB become the dominant shareholder. Metlife will issue fresh shares to PNB which will increase the size of the company’s capital to Rs. 2,596 crore and later buy stake from the other existing stakeholders to maintain its stake at 26% within 120 days. PNB’s entry will dilute the equity of all the existing shareholders which include M Palonji and Co, Jammu & Kashmir Bank and IGE (a Pune-based company), besides a clutch of private equity investors.

Another positive aspect of the move is that PNB will be able to take insurance to the mostly untapped rural and semi-urban pockets of India. Statistics show that 60% of PNB’s branches are in the rural and semi-urban areas, which can help augment the insurance penetration in the country. Industry analysts have also welcomed the partnership believing that it has the potential to drive Metlife into the top-tier of the Indian life insurers and also go a long way in doubling its market share.



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IRDA Penalizes New India Assurance

Insurance Regulatory and Development Authority (IRDA) has imposed a fine of Rs 100,000 (Rs 1 lakh) on New India Assurance. The penalty came from a case of non-refund of Mediclaim to a policy holder. The insured person, Shri Hemendra Mehta, was staying abroad and refund was refused on this ground. When Shri Mehta emailed New Assurance India that refund can be considered for the period of stay outside India during the policy period, they didn't respond (Email dated 24.11.2009).

So the matter was taken up by IRDA and the regulatory body decided to penalize New India Assurance. With this, the IRDA has once again exemplified the tight regulatory control over the insurance companies. Not too long ago, SBI life faced IRDA's ire. (Read the whole article here).

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Ambani brothers may meet head on in the Insurance market.

The strife between the Ambani brothers may take another interesting turn with The Competition Commission of India’s (CCI) latest announcement. The commission has given a go-ahead to the 74% acquisition bid by Mukesh Ambani’s Reliance Industry Limited (RIL) from each of Bharti AXA Life Insurance and Bharti AXA General Insurance. However before the actual action begins, the acquisition is awaiting some more approvals including the implementation of the newly proposed IRDA guideline on equity stake selling (find out more about this IRDA guideline here

For the financial year 2011, Anil Ambani's life insurance venture showed a first year premium of Rs 3,000 crore while Bharti Axa could collect only Rs 360 crore. In the general insurance, Bharti Axa recorded Rs 550 crores as against Rs 1655 crores from Reliance. While Bharti Axa life Insurance ranks 20th amongst 23 life insurance companies and Bharti Axa General Insurance ranks 15th amongst 19 general insurance companies, Anil Ambani has managed to find a place in the top 5.

So is Mukesh Ambani worried? A man with such a brilliant smile would never be.

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IRDA plans to change lock in period for stake sale

Effectively managing capital and coping with long gestation period are two factors which determine which companies survive in the competitive insurance market. Earlier this year in June, Sunil Mittal decided to sell its 74% stake both in Bharti Axa Life Insurance and Bharti Axa General Insurance to Mukesh Ambani precisely for these reasons.

Acknowledging this, Insurance Regulatory and Development Authority (IRDA) already has Article 6AA of the insurance act in place. However some aspects of this act may soon change. Currently the guidelines says that promoters holding a 26% stake in life insurance companies needs to be locked in for a period of 10 years. But news is brewing that a new IRDA guideline would allow promoters to escape as early as 5 years. The new draft however does not apply to those promoters subscribing to IPOs of insurance companies. The draft guideline is expected in August and after public comments and recommendations, the final guideline is expected in October.

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This week’s top Investment News in the Insurance Sector

Some of the top investments news in the investment sector this week

• Reliance Life Insurance plans to divest 23% stake in the domestic public and private lenders or banks. This come after Reliance has already signed a pact to sell 26% to Nippon Life. Some of the banks which have taken interest in this deal are Axis Bank and Syndicate Bank
• Exide plans to pump in another round of investment in ING Vysya Life Insurance Company. This time the amount would be somewhere around Rs 150 crore. It should be noted that Exide has already been investing in ING Vysya Life Insurance.
• Piramal Healthcare is planning to buy Enam Financial’s stake in ING Vysya Life Insurance. The present valuation of the insurance company stands at Rs 2400 crore. Last year Piramal Health got Rs 17,190 crore from Abbott Laboratories for its generic unit.
• Life Insurance Corporation of India (LIC) plans to invest more than Rs 2 trillion through the March fiscal. Apart from this its planned investment in equities will exceed last year’s Rs 400 billion.

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